What in the World Happened Over The Weekend?
This image provided on Sunday, Sept. 15, 2019, by the U.S. government and DigitalGlobe and annotated by the source, shows damage to the infrastructure at Saudi Aramco’s Abqaiq oil processing facility in Buqyaq, Saudi Arabia. U.S. government | Digital Globe | AP
Saudi Oil Attacks
On Saturday, September 14th, Saudi Aramco’s Abqaiq facility and Khurais oilfield got hit by some unconfirmed aggressor, knockin' out about 5.7 million barrels of production over the weekend. I tell you what, dat accounted for near 50% of Saudi oil production and equaled about 5% of crude oil production for the whole world. Dat was the biggest attack on the oil infrastructure over there since the 90’s, back when the Iraqi military was firin' scud missiles into the Saudi Arabian kingdom.
Damage to the infrastructure at Saudi Aramco’s Abqaiq oil processing facility in Buqyaq, Saudi Arabia. U.S. government/Digital Globe | AP
Who attacked 'em?
Now, the Houthi Rebels have gone and claimed responsibility, but dem claims just don't quite add up, I reckon. From the direction of the attack (which wasn't Yemen like the rebels claimed), to the Iranian weapon technology they found at the attack sites… somethin' just doesn’t smell right. In any case, it's too soon to know for sure who carried out the attack.
(If y'all recall the events around the strait of Hormuz, dem Houthi rebels oughta sound familiar, but if not, you can read all about it right here in our previous blog! )
How is Saudi Aramco Oil recoverin'?
Since Wednesday, September 18th, Saudi Aramco has managed to restore about 50% of dat lost production capacity. Folks are speculatin' dat production levels will be back to where they were before the attack within a month. On top of dat, it's worth notin' dat Saudi Aramco said they got 35-40 days’ worth of supply ready to go to keep up with their contracts, and beyond dat, there are strategic petroleum reserves dat can be brought into the market to keep us from runnin' short.
How has this messed with current and future oil pricing?
Right after dem attacks, oil prices shot up mighty high, and since then they've backed down just a little bit, but they're still higher than before the attack. For example, WTI popped over $60 per barrel on Monday, September 16th, and they're still tradin' at dat “geopolitical uncertainty” premium, holdin' onto about a +$4 barrel net gain.
While Saudi Aramco has been mighty quick to respond and patch up their facilities, the big question is still hangin' in the air. How were they able to attack in the first place? Lookin' at military statistics, Saudi is ranked 3rd in the world for their defense spendin'. So, in theory, this whole mess could've and should've been stopped. This unanswerable question tips the scale even further into dat “geopolitical uncertainty” way of thinkin', and 'cause of dat, we oughta expect to see a higher price per barrel dependin' on how this all shakes out over the rest of the year and on into the next.
Who said dem options were worthless?
WTI Futures had a mighty unexpected turnaround 'cause of all dese events. As of Friday, there were about 62,000 outstanding calls with prices rangin' from $55-60 per barrel; higher than the 54.85 settlement. Dat price spike on Monday meant dem “worthless” contracts could potentially be worth millions overnight. Talk about one man’s trash, huh…
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